Never sign on the dotted line without first educating yourself about what NOT to do when seeking a mortgage. Asim Ali has got you covered! Continue reading to learn more about common rookie mistakes people make when shopping for their future homes.
1. Assuming all mortgages are the same
Obtaining a mortgage is not something people do every day, and with all of the contradictory information available online, it can be quite confusing. To make sure you’re getting the best possible deal on your mortgage, look for advice from someone who has experience in the industry and whose interests align with yours. After all, a mortgage is likely to be one of the biggest purchases you’ll ever make in your life.
2. Not putting a strategy in place
You will pay less interest overall if you pay off your mortgage sooner. There are various strategies and combinations of them that may be used depending on the client’s circumstances. You can choose a seven-year or longer plan and start with a variable rate (typically a lower rate) and then lock into a 5-year rate when rates begin to rise. Increase your payment by using your prepayment rights to the amount of the 5-year fixed rate while in the variable rate phase. You’ll be taking advantage of the shorter variable rate period to save money by paying down your principal faster.
Another potential solution would be to use your prepayment privileges. Every year, you will have a certain percentage of the original mortgage amount available to pay down without penalty.
Lastly, for people that get paid every two weeks, a biweekly accelerated payment schedule is often best. This would be 26 payments in the year. If you compare this to monthly payments, it results in one entire extra month of payments which means the debt is paid off more quickly.
3. Not keeping your credit in good shape
Lenders’ primary concerns with mortgage applications are income, credit, down payment, and location. If your credit is damaged, it will take time to repair and not doing so would be a mistake. So if you want to acquire quickly, it might be a stumbling block for you. Making on-time payments, avoiding going over the limit, and limiting the number of inquiries made on your credit bureau can help raise your score.
4. Not understanding rates
Not all rates are the same– there are separate rates for insured mortgages, conventional mortgages with 25-year and 30-year amortizations, etc. Furthermore, depending on the lender and type of property (owner-occupied or investment), these rates will differ. When requesting a rate quote from someone, ensure that you’re specific about what you need by providing information such as owner type percentage of down payment, and property location.
5. Misunderstanding the process
It’s crucial to understand the process/logistics (timing) of buying a house to avoid making a mistake. There are certain procedures that must be followed, and each one takes time. To avoid the burden of a short possession date and time, get preapproved and request a written timetable of the steps and timing.
For more information on the services I offer or if you have any questions about getting a mortgage, contact me today.